Microsoft 5G Deal with Etisalat Ups Rivalry with Ericsson, Nokia

With its Nexus platform and mix of core network applications, Microsoft famously plays a kind of Greek Atlas to AT&T, shouldering the burden of the US telco's 5G network after acquiring staff and assets from it several years ago. But the software giant has not had much telco cloud business to flaunt outside its domestic market. Operators have been happy to run IT workloads on hyperscaler clouds. When it comes to the critical telco workloads, many have preferred to keep them on a tighter leash.

It all makes a new deal with Etisalat of the United Arab Emirates very important, according to Yousef Khalidi, the corporate vice president of Microsoft's Azure for Operators unit. Following the example of AT&T, the Emirati operator will take 5G packet core technology from Microsoft and run it on the Nexus platform. "This is not just a small network on the side, an IoT or backup network," Khalidi told Light Reading. "This is real production going on."

As in the case of AT&T, however, and contrary to some earlier reporting, this does not mean Etisalat is putting its core in the public cloud. "Azure Operator Nexus is a hybrid cloud, and so the actual user plane, control plane of the network runs on-premises," explained Khalidi. "But Nexus is connected to the public cloud and so the management plane data, as the customer wants, can flow to the cloud." Microsoft, moreover, set up UAE public cloud facilities in 2019. That is likely to have addressed sovereignty concerns about the storage of sensitive data in other jurisdictions.

What's clear is that the 5G packet core is an evolution of the Affirmed technology Microsoft picked up in 2020 when it bought Affirmed Networks in a deal reportedly valued at $1.35 billion. That was the first of two significant telecom takeovers by Microsoft that year, followed just a few weeks later by its acquisition of Metaswitch. The contract with Etisalat now firmly establishes Microsoft as a 5G core vendor outside the US and new rival there to established telecom equipment suppliers like Ericsson and Nokia.

Out with the old

Less clear is which existing core vendor Etisalat will be replacing, and there are still third parties in the mix. "Even with AT&T, we run many of the brand name vendors you know of," said Khalidi. "In Etisalat's case, they chose our packet core plus some other peripheral NFs [network functions]." He declined to speak about the vendor that has lost out, and Light Reading had not been able to confirm its identity at the time of publication. But Ericsson previously named Etisalat as a 5G cloud core customer during a presentation in 2020.

Will similar deals for Microsoft follow? Several of Europe's big telcos seem determined to build their own platforms and not take one from a hyperscaler. In the UK, BT has been doing that in partnership with Canonical. Germany's Deutsche Telekom has an equivalent internally developed platform called TCaaS. Both Vodafone and France's Orange have also sounded wary about entrusting their telco clouds to third parties. Yet Microsoft is in the running for a cloud core deal with Three, the smallest of the UK's four mobile network operators, which currently uses Nokia in this part of its network but has put the work up for tender.

"My message to all of them is that they need to look at the option of moving up the stack and using more AI apps in their system, to look at adding value as opposed to doing plumbing," said Khalidi. "Leave the plumbing the plumbers. I have to admit not all of them are there yet, but there is movement."

He has previously been disparaging about what he refers to as DIY clouds. And last year, in collaboration with market-research and consulting firm Analysys Mason, Microsoft published a paper on the cost case for working with a hyperscaler versus the DIY model. "Basically, the opex savings are around 58% or so in that model," said Khalidi. "It's the same study we applied when talking to Etisalat, and we're talking to others as well."

Operators see benefits in being able to host all network functions, and not just the core, on the same horizontal platform. Khalidi declined to speculate on Etisalat's plans here but said this would align with Microsoft's "vision" for Nexus as a platform supporting multiple workloads, ultimately including the radio access network.

Telcos, however, have continued to complain that network functions are still too "siloed," designed in many cases to run on the vendor's own platform instead of third-party alternatives. "The nature of cloud-native is that it can run on any stack," said Gabriela Styf Sjöman, BT's managing director of research and networks strategy, at a recent press briefing. "I think the challenge for the legacy network equipment providers is that they can't afford to rewrite the code. It has been a long journey for them to first virtualize. To then make it cloud-native is a massive investment."

February 26, 2024